Oil Wars: What Should India do?

OPEC's oil price manipulation has been a pain for India. What could be the solution? Read on.

Nature and Nurture define the fate of many nations. Blessed by nature, just by virtue of their location near oil reserves, the OPEC countries have been able to amass a lot of wealth. They command the price because this black gold has proven to be irreplaceable at a mass scale.

On the other hand, the less fortunate countries like India are at their mercy (as it has to import 84% of its oil requirement) and have to pay up whatever they ask. No matter how much technology has progressed, they still depend a lot on oil to nurture their economy.

And once again, OPEC is resorting to cutting down its oil productions in order to increase the prices. But, this time India has a plan. A plan to show OPEC that it cannot just take decisions at its whims.

So… what’s our plan, now?

Stop giving them unnecessary bhaav (attention).

In the period between Jan-March 2020, the top regions from where India imported its crude were Iraq, Saudi Arabia and other Gulf nations. In fact, OPEC countries account for 86% of India’s oil import bills (tweet this).

But, in Jan 2021, when OPEC countries reduced their supply, India simply increased the purchase of cheaper crude from the US by 48%, making the US our second-largest supplier and pushing Saudi Arabia to the fourth position.

But, can the OPEC countries just decide to reduce their production at their discretion? Aren’t such major purchases governed by contracts?

Yes, the purchases are governed by contracts. But, the terms are made to secure the pockets of the supplier countries, and not to safeguard the consumer countries.

The supplier countries can lower their production and increase the price and refuse to make sales at the contracted prices. But, the purchasing country has to give a notice six weeks in advance of the quantity of oil they plan to purchase and are not allowed to back out!

Dadagiri by OPEC at max?

Well, India is also the world’s third-largest crude oil importer. Its decision to not purchase at higher prices can also make a dent in the sales of producer countries. So, even if the producers have all the power, shouldn’t the consumer countries (like India) form a cartel too?

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